On Wednesday, the Fed
finally started its easing cycle and decided to do it with a 50 bps
cut. The market was already leaning towards a 50 bps move, so it wasn’t a
surprise.

The larger cut was framed
as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by
the end of the year and less than the market expected in 2025.

The US Dollar didn’t get a
boost despite the rise in Treasury yields. Now that the decision is behind us,
the focus will be on the economic data.

If we start to see an
improvement, then Treasury yields will likely continue to rise and lead to a
reprising in the dovish expectations supporting the greenback in the
short-term.

Conversely, if the data
weakens, the market will likely go ahead with expecting more 50 bps cuts by
year-end and weighing on the US Dollar.

On the GBP side, the BoE
kept interest rates unchanged yesterday and sounded more hawkish than expected
with the markets now pricing just 39 bps of easing by year end.

GBPUSD
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that GBPUSD managed to rally to a new high following the Fed’s and BoE’s
decisions. From a risk management perspective, the buyers would have a much
better risk to reward setup around the 1.30 handle. The sellers, on the other
hand, will likely wait for the price to fall below the previous high level at
1.3265 to start piling in for a correction lower.

GBPUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have trendline
defining the current bullish momentum. If we get a pullback, the buyers will
likely lean on the trendline with a defined risk below it to position for the
continuation of the uptrend. The sellers, on the other hand, will want to see
the price breaking lower to increase the bearish bets into the 1.30 handle.

GBPUSD Technical Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much else we can add but a move below the 1.3265 level will likely increase
the bearish momentum into the trendline as the sellers are likely to pile in. The
red lines define the average daily range for today.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

On Wednesday, the Fed
finally started its easing cycle and decided to do it with a 50 bps
cut. The market was already leaning towards a 50 bps move, so it wasn’t a
surprise.

The larger cut was framed
as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by
the end of the year and less than the market expected in 2025.

The US Dollar didn’t get a boost
despite the rise in Treasury yields. Now that the decision is behind us, the
focus will be on the economic data.

If we start to see an
improvement, then Treasury yields will likely continue to rise and lead to a
reprising in the dovish expectations supporting the greenback in the short-term.

Conversely, if the data
weakens, the market will likely go ahead with expecting more 50 bps cuts by
year-end and weighing on the US Dollar.

On the EUR side, the ECB speakers seem to prefer a rate cut in December while the market is pricing a 68% chance of a cut in October nonetheless. The central bank is data-dependent, so that’s what will drive their decisions.

EURUSD Technical
Analysis – Daily Timeframe

On the daily chart, we can
see that EURUSD is back around the 1.12 handle after some choppy price action
following the Fed’s decision. From a risk management perspective, the buyers
would have a much better risk to reward setup around the trendline,
although a break of the high will likely see the bullish momentum increasing. The
sellers, on the other hand, will likely step in around these levels to position
for a drop into the trendline.

EURUSD Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a consolidation right around the 1.1155 level. This might act
as kind of a barometer with the price staying above being more bullish and
staying below being more bearish.

EURUSD Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, there’s
not much we can add as the price action has been very choppy and fundamentally
there’s also a good chance to see some strengthening in the USD if the data
starts to improve. The red lines define the average daily range for today.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• BOE leaves bank rate unchanged at 5.00%, as expected
• Dollar struggles on the session, equities ramp higher as well
• Weekly update on interest rate expectations
• Fed still on track to cut rates by 125 bps in total for 2024 – Citi
• Goldman Sachs now sees Fed cutting by 25 bps at each meeting until June next year
• ECB’s Schnabel: Sticky services inflation is keeping headline inflation at elevated level
• Eurozone July current account balance €39.6 billion vs €50.0 billion prior
• Switzerland August trade balance CHF 4.56 billion vs CHF 4.89 billion prior

Markets:

• AUD leads, JPY lags on the day
• European equities higher; S&P 500 futures up 1.7%
• US 10-year yields up 2.4 bps to 3.709%
• Gold up 1.1% to $2,587.63
• WTI crude up 0.9% to $71.58
• Bitcoin up 3.9% to $62,558

The central bank bonanza continued with the BOE today and as expected, they left the bank rate unchanged at 5.00%

The pound still rallied in the aftermath though, briefly nudging above 1.3300 to its highest levels since February 2022. GBP/USD is still up 0.6% on the day, keeping closer to 1.3285 currently. The BOE signaled that they remain comfortable in keeping policy restrictiveness and the bank rate vote also revealed just one dissenter (Ramsden did not vote for a rate cut this time).

The odds of a 25 bps rate cut by the BOE for November fell as such. It is now seen at ~63%, down from having been fully priced in before this.

As for the bigger picture in markets today, it’s all about the post-Fed digestion. And that is seeing the dollar fall as equities are soaring on the day.

USD/JPY might be sitting higher as long-end yield are holding up but that’s the only consolation for the dollar. The pair did drop to a low of 142.03 in European morning trade but picked itself up to sit closer to 143.00 now.

As for other dollar pairs, it was more of a straightforward story as the greenback weakened across the board.

EUR/USD moved up from 1.1120 to 1.1160-70 levels while USD/CAD fell from 1.3600 to 1.3533 before holding just above that now. The antipodeans are the ones running away with things as AUD/USD climbs to its best levels for the year. The pair is up 0.9% to 0.6826 now and just off the high earlier of 0.6839.

In the equities space, European indices are posting gains above 1% now with the CAC 40 even bordering near 2% gains on the day. US futures are also ripping higher with S&P 500 futures up 1.7% and Nasdaq futures up 2.2% on the day. After some trepidation yesterday, investors are liking the fact that the Fed did give in to markets with the 50 bps rate cut.

As for commodities, gold is nearing fresh record highs again in a push to $2,587 currently. Meanwhile, silver is up over 3% to above $31 and testing its highest levels since July.

Coming up, we’ll have the US weekly jobless claims to add to the mix.

This article was written by Justin Low at www.forexlive.com.

• Prior 5.00%
• Bank rate vote 8-0-1 vs 7-0-2 expected (only Dhingra dissented, wanting to cut by 25 bps)
• Need to be careful not to cut rates too fast or by too much
• Most MPC members think in the absence of material developments, a gradual approach to removing policy restraint would be warranted
• Labour market continued to loosen but that it remained tight by historical standards
• But data quality issues continued to be an area of concern i.e. LFS
• „Range of views“ on inflation persistence among those who voted to keep rates unchanged
• Despite that, the current policy stance was judged to be appropriate
• Monetary policy will need to continue to remain restrictive for sufficiently long
• To monitor closely the risks of inflation persistence and will decide the appropriate degree of monetary policy restrictiveness at each meeting
• Full statement

Cable has moved up to its highest levels since February 2022, nudging just above 1.3300 currently. The takeaway from the BOE is that they continue to have worries about inflation and that they are quite comfortable in moving slowly to remove the degree of policy restriction.

The key wording that „monetary policy will need to continue to remain restrictive for sufficiently long“ has not been removed.

Traders had previously ascribed to thinking that the BOE will pause today before cutting again in November. But the odds of that are now at ~63%. So, it isn’t quite set in stone now. Traders had previously fully priced in a 25 bps rate cut for November.

If UK inflation data in September comes in similarly to what we saw yesterday here, there will be growing suggestions that the BOE might have to stay on the sidelines again.

This article was written by Justin Low at www.forexlive.com.

As such, they are maintaining their outlook for the Fed to cut by 50 bps in November before closing things out with a 25 bps cut in December. The latter is changed as Citi did previously expect the Fed to go by 25 bps yesterday before moving by 50 bps in November and December. But the total in terms of how much the Fed is cutting remains the same.

“Powell noted a number of times that today’s 50bp cut is a “commitment” to not get behind the curve which suggests the bar for further large rate reductions is very low. We continue to see risks as balanced toward a more rapid softening of labor market data and a more aggressive pace of rate cuts.“

This article was written by Justin Low at www.forexlive.com.

Yesterday, the Fed finally started its easing cycle and decided to do it with a 50 bps
cut. The market was already leaning towards a 50 bps move, so it wasn’t a
surprise.

The larger cut was framed
as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by
the end of the year and less than the market expected in 2025.

What’s important is that
the Fed is cutting into a resilient economy which should lead to better growth
expectations and support the stock market.

Nasdaq
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the Nasdaq is now back at the key 20000 level. The sellers will likely
lean on the level to position for a drop into the major trendline.
The buyers, on the other hand, will want to see the price breaking higher to
increase the bullish bets into new highs.

Nasdaq Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have a minor upward trendline defining the current bullish
momentum. If we get a pullback, the buyers will likely lean on the trendline to
position for new highs, while the sellers will look for a break lower to
increase the bearish bets into new lows.

Nasdaq Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the recent price action with the whipsaw on the Fed’s decision
and then the rally overnight. There’s not much else we can glean from this
timeframe as the buyers will look to buy the dips, while the sellers will wait
for a bearish catalyst or a break below the trendline. The red lines define the
average daily range for today.

Upcoming Catalysts

Today we get the latest US Jobless Claims figures which is the last important
economic release of the week.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Yesterday, the Fed finally started its easing cycle and decided to do it with a 50 bps
cut. The market was already leaning towards a 50 bps move, so it wasn’t a
surprise.

The larger cut was framed
as kind of an “insurance” cut with the dot plot showing two more 25 bps cuts by
the end of the year and less than the market expected in 2025.

What’s important is that
the Fed is cutting into a resilient economy which should lead to better growth
expectations and support the stock market.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that the S&P 500 after some short-term noise after the FOMC decision,
rallied to a new all-time high. The buyers will now keep on buying the dips as
long as the data continues to remain benign or, even better, improves.

This is
not a market for the sellers, so they might want to wait for key breaks on the
lower timeframes or better yet for recessionary catalysts before piling in.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see that we have an upward trendline
defining the current bullish momentum. We can expect the buyers to keep leaning
on the trendline to position for new highs, while the sellers will look for a
break lower to pile in for more downside.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see more clearly the recent price action with the whipsaw on the Fed’s decision
and then the rally overnight. There’s not much else we can glean from this
timeframe as the buyers will look to buy the dips, while the sellers will wait
for a bearish catalyst or a break below the trendline. The red lines define the
average daily range for today.

Upcoming
Catalysts

Today we get the latest US Jobless Claims figures which is the last important
economic release of the week.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

• Cable nudges up to 1.3200 after sticky UK inflation data
• UK inflation data bolsters odds of BOE keeping bank rate unchanged tomorrow
• What are the main events for today?
• There will be disappointment one way or another come the end of today
• ECB’s Villeroy says likely to continue with rate cuts
• UK August CPI +2.2% vs +2.2% y/y expected
• Eurozone August final CPI +2.2% vs +2.2% y/y prelim
• US MBA mortgage applications w.e. 13 September +14.2% vs +1.4% prior
• Japan maintains economic assessment in latest monthly report

Markets:

• NZD leads, USD lags on the day
• European equities lower; S&P 500 futures up 0.1%
• US 10-year yields up 2.8 bps to 3.677%
• Gold up 0.4% to $2,578.75
• WTI crude down 0.9% to $69.22
• Bitcoin down 0.7% to $59,913

It’s all about the countdown to the Fed and we’re seeing some mixed moves in markets ahead of the main event later.

The dollar is weaker across the board and that despite Treasury yields holding up on the session. USD/JPY remains pinned down since Asia trading, keeping around 141.60-80 levels mostly during the session.

UK inflation data was the main highlight and that helped to prop up sterling a little bit. Services inflation remains a problem for the BOE and that increased odds of the central bank standing pat tomorrow. GBP/USD moved up from 1.3160 to just above 1.3200 currently.

Besides that, the greenback held slightly softer across the board with the antipodeans gaining some modest traction. AUD/USD is up 0.5% to 0.6785 while NZD/USD is up 0.7% to 0.6225 on the day.

That comes even as US futures are keeping more pensive, while European indices are looking rather sluggish. On the latter, perhaps investors are taking on a more cautious approach as the Fed decision will come after the European close.

Tick tock, tick tock. The end of the FOMC meeting can’t come soon enough.

This article was written by Justin Low at www.forexlive.com.

• Prior +1.4%
• Market index 266.8 vs 233.7 prior
• Purchase index 146.1 vs 138.6 prior
• Refinance index 941.4 vs 757.8 prior
• 30-year mortgage rate 6.15% vs 6.29% prior

A further drop in the average rate of the most popular US home loan sparked a big jump in refinancing activity in the past week. And that led to the surge in mortgage applications, also helped by a slight bump in purchases activity. Recovery time?

This article was written by Justin Low at www.forexlive.com.

Heavy is the head that wears the crown. The Fed has a very, very big decision to make today. A rate cut is all but confirmed but the major question is by how much? They’ve been suggesting a likelihood of moving by 25 bps since Jackson Hole but market players aren’t listening all too intently. Even if that is what is „expected“ according to estimates from economists, traders are still pricing in considerable odds of a 50 bps move.

So, what will the Fed do later today?

Either way, someone, somewhere is bound to get disappointed. And as is the case when such emotion seeps into markets, expect there to be plenty in the reaction and some significant moves in the aftermath.

The case for moving by 25 bps has been one that Fed policymakers have been outlining since Jackson Hole. The disinflation process is starting to take hold but still moving rather gradually. And there is some softening in labour market conditions but it still largely fits with their soft landing narrative.

So, why the need to push for a 50 bps move?

Well, this is very much markets trying to signal to the Fed they are behind the curve and get policymakers to do their bidding. They tried kicking and screaming in early August and that didn’t work. So, there is a tail risk the carry trade unwind episode could reemerge if the Fed does disappoint certain quarters in the market.

Fed watcher Timiraos contributed to the indecisiveness in markets with his piece last week here. And he added more colour to things yesterday here.

The case in point for a 50 bps move is that the Fed might feel more comfortable in starting off with a bit of a bigger move.

For one, it’ll alleviate suggestions that they are behind the curve and need to do more. Secondly, if economic data is to worsen in the weeks ahead, they’ve at least shown that they are trying to address that in a prompter manner. That as opposed to moving by 25 bps and then not providing much hints about the next move in November.

Nonetheless, the Fed has plenty of ammunition still in the tank. So, to say that they’ve missed the boat in not moving by 50 bps today and that it is all doom and gloom would be misplaced.

I mean, let’s be real. Labour market conditions in the US have shown signs of cooling with some noticeable hiccups or two recently. But other economic data are not screaming out for a significant downturn or recession. As such, a soft landing scenario is still very much valid by all accounts.

If the Fed does stick to its guns, I reckon there will be plenty of kicking and screaming before the week is over. But even if they do make a decision to try and pacify markets, there will be discontent but perhaps not as much given the current pricing. If anything, it’ll be dollar bulls that will be cursing their luck in thinking that the Fed has the cojones to step up when it matters.

But we’ll see what they do later on in the day. Either way, there will be disappointment no matter what the outcome is.

This article was written by Justin Low at www.forexlive.com.